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Apartment Landlords, Know Your Rent Collection Risk Profile

National  + Weekender  | 

By Paul Bubny

“There is no question that landlords have been challenged in 2020 by both federal, state, and municipal moratoriums on evictions and the inability to have any recourse against tenants who are unable to pay their rent,” writes Barry Saywitz, president of the Saywitz Company in Newport Beach, CA.

Their tenants may be challenged to varying degrees as well, Saywitz writes. How much of a challenge each tenant faces—and in turn, how much of a challenge he or she presents for the landlord depends on individual circumstances. For purposes of helping landlords gauge the challenges that rent collection will present in 2021, Saywitz groups tenants into one of six buckets:

Normal Payers. “These tenants have continued to work consistently throughout the pandemic and/or have savings which have allowed them to continue to pay their rent without any issues. They have paid on time and therefore there are no issues with regards to collection or ramifications.”

Late Payers. “These are tenants who have continued to work however, their hours may have been cut or their work may be sporadic and have limited savings, therefore causing them to pay late into the month. These tenants typically will get current prior to the end of the month but have trouble paying on the 1st as they have previously.”

Trickle Payers. Due to their work circumstances and/or those of their roommates or spouses, these tenants may be paying weekly or making multiple payments throughout the month. “While the landlord may not be excited to work with this type of tenant, they have no choice. If the end result is that the tenant is paid in full by the end of the month then neither party is significantly worse off.”

Outstanding Balance but Paying. “They are continuing to pay going forward but are struggling to deal with the outstanding balance of getting completely current. In this instance landlords and tenants will have to work together either on a repayment plan or partial forgiveness by the landlord. Otherwise, once the pandemic ends in early 2021 the tenant will be forced to move due to the fact that they have an inability to repay the outstanding balance which is due.”

Non-Payers Due to Hardship. “In this scenario it seems impossible for the tenant to be able to get back on track to pay their rent and once the eviction moratorium is lifted you will see landlords work to either move forward with the eviction process or work out arrangements for those tenants to vacate so that they can re-rent the units to tenants that have the capacity to pay.

No Call, No Pay, No Communication. “These tenants certainly may have financial hardship but at the same time this group of tenants is a combination of those who have the capacity to pay but chose not to pay. They have ceased communications with the landlord and are simply not paying.”

For the landlord, Saywitz advises, it’s imperative to analyze each of these buckets separately as each has its own strategy and ramifications.  “All tenants must be dealt with under an individual basis based on their ability to pay and income going forward,” he writes. “The goal in 2021 will be for landlords to minimize their losses as best as they can and be able to re-rent the defaulted units to new, better tenants with the ability to pay.”

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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